Rattner Settles Pension Inquiry For $10 Million

By PETER LATTMAN

Published: December 31, 2010

9:02 p.m. | Updated The financier Steven L. Rattner has agreed to pay $10 million to settle civil charges that he engaged in a kickback scheme involving New York state's pension fund, ending a scathingly personal and public feud between Mr. Rattner and the New York attorney general, Andrew M. Cuomo.

Under the settlement announced Thursday - just two days before Mr. Cuomo becomes New York's governor - Mr. Rattner will pay restitution to the state pension fund and will be barred from appearing in any capacity before a public pension fund within the state for five years. He did not admit any wrongdoing.

The surprise settlement extracts from Mr. Rattner far less than the attorney general initially sought. In two lawsuits filed last month, Mr. Cuomo sought to recover $26 million and to impose upon Mr. Rattner a lifetime ban from the New York securities industry. In October, Mr. Rattner rejected a settlement offer from Mr. Cuomo that would have required him to pay $20 million.

Despite the public rancor, Mr. Cuomo and Mr. Rattner worked over the last couple of weeks to put this case behind them. The two men met face to face last week at Mr. Cuomo's office in Lower Manhattan, in addition to having several telephone conversations, to settle their differences and reach a deal, say people with direct knowledge of the talks who requested anonymity because they were not authorized to speak about them.

For Mr. Rattner, the settlement allows him to escape the harsh spotlight he has felt since the spring of 2009, when the Securities and Exchange Commission filed a lawsuit against a New York pension official that detailed accusations of improper dealings. The case came at an awkward time, casting a cloud over Mr. Rattner just as President Obama had placed him in charge of overhauling the United States automobile industry.

The S.E.C. and Mr. Rattner reached a separate settlement in October, with Mr. Rattner paying $6.2 million and agreeing to a two-year ban from work in certain Wall Street businesses. The Quadrangle Group, the private equity firm formerly headed by Mr. Rattner, also struck a deal with both Mr. Cuomo and the S.E.C., paying $12 million to end its role in the case.

Mr. Rattner, a longtime Wall Street deal maker, now works at Willett Advisors, the personal money-management arm of his close friend Michael R. Bloomberg, the billionaire mayor of New York. The attorney general's settlement will no have no effect on Mr. Rattner's current work. The S.E.C.'s two-year ban currently prohibits him from being paid by Willett and participating in some investment activities at the firm.

In the last several months, Mr. Rattner - whose net worth was $188 million to $608 million, according to a 2009 disclosure filing - has been promoting his recent book on the restructuring of General Motors and Chrysler.

For Mr. Cuomo, a settlement with Mr. Rattner closes the last unresolved lawsuit in the attorney general's sprawling three-year investigation into corruption involving New York State's $134 billion pension fund. Eight people pleaded guilty to criminal charges in the case. Several defendants who have pleaded guilty have yet to be sentenced.

''I am gratified that we have been able to reach an agreement in this case, as it resolves the last major action of our multiyear investigation,'' Mr. Cuomo said in a statement. ''Through the many cases, pleas and settlements in this investigation, I believe we have been able to help restore and protect the integrity of the state pension fund.''

The settlement also avoids having a motivated enemy in Mr. Rattner, who, despite being brought low by his involvement in the scandal, continues to hold influence in New York's financial, political, and media circles.

Mr. Cuomo also wanted to clear the docket for his successor, Eric T. Schneiderman, said a person familiar with Mr. Cuomo's thinking.

When Mr. Cuomo became attorney general in 2007, his predecessor, Eliot Spitzer, had left him with several prominent and challenging cases involving combative defendants, including lawsuits against Richard A. Grasso, the former chairman of the New York Stock Exchange, and Maurice R. Greenberg, the former chief executive of the American International Group.

Mr. Rattner was similarly pugnacious. After Mr. Cuomo sued him last month, Mr. Rattner began an aggressive legal and public-relations offensive. He called the lawsuit politically motivated and said he would not be bullied.

During a television interview with Charlie Rose, Mr. Rattner accused Mr. Cuomo of ''extortion'' and said this conduct was ''not the kind of behavior I think we want out of an attorney general or a governor.''

Mr. Cuomo was infuriated by Mr. Rattner's public statements. In an interview with The New York Times, Mr. Cuomo accused Mr. Rattner of lying in the early stages of the inquiry, a claim Mr. Rattner's lawyers denied.

After a monthlong exchange of vitriolic accusations from both camps, the statements on Thursday had a more measured tone. Mr. Rattner expressed contrition. ''I apologize if during the course of this process there is anything I did that may have made reaching this agreement more difficult,'' he said in a statement.